Endowments Losing Quarter of Top Staff

FUNDfire, October 8, 2007

By Whitney Kvasager

Almost a quarter of top university endowment staffers quit over the past two years, a new Mercer study shows. Some watching the situation say conflict over pay – not the pay itself – is what drives people away.

Researchers canvassed 45 universities for the study, which was privately commissioned by a university. Mercer found that 23% of CIOs and other high-level investment staff members left during 2005 and 2006. Among peers of the university that commissioned the report, the turnover was even greater: 40% of the top investment staff quit over that time period among that subset of 20 endowments. Mercer declines to name the client or give such specifics as its size or location, and declines to release the report itself.

“Twenty three percent is a large enough number to cause concern,” says Mercer principal Nanci Hibschman. “There can be many reasons for turnover, like the appeal of a new role. I think a lot of folks assume that it’s about compensation, but that’s not the whole picture.”

University endowment pay, while not approaching Wall Street levels, is still better than that at other institutions, such as public pensions. The median university endowment CIO salary is $151,626 for fiscal year 2007, says the College and University Professional Assocation for Human Resources. Average compensation for a public pension CIO was $128,000 in 2005, according to Greenwich Associates.

Jack Meyer made much more when he was CEO at Harvard’s endowment. He and five managers were paid $78.4 million when the fund returned slightly more than 21% in fiscal year 2004. Alumni and professors thought that was too much and Meyer quit the next year amid controversy over his compensation. It took Harvard nearly a year to replace Meyer and the $35 billion endowment is now looking again; his replacement, Mohamed El-Erian, resigned last month.

Tensions like those Meyer felt often drive investment officials away, says Alvin Spector, partner at executive search firm Lantern Partners.

“That is a constant battle. Whenever we get resumes from candidates looking to get out of a university, most often it’s over frustration with the politics that are going on within the organization,” he says. “A lot of it is compensation related.”

Spector says the compensation itself is not usually a point of contention.

“University endowments have been able to pay on parity with private investment firms to attract the best talent possible,” he says. “[Compensation] is all over the board. It depends on the size of the foundation and endowment. It’s a very wide range. You do find that the largest endowments pay very well.”

William Wechsler, principal at Greenwich Associates, agrees. He says universities have no trouble drawing in talent.

“The question is, can you keep the talent once you have it. That gets very tricky,” he says. “Anybody who is capable of running these endowments is by definition capable of getting paid many, many multiples of what they are getting paid in the university setting.”

For some, experience and quality of life are enough to attract them to a college endowment.

“An endowment provides a great breadth of experience,” says James Walsh, who has been Cornell University’s CIO for a year, after more than a decade at Hermes Pensions Management. He declines to give his compensation, but highlights the typical endowment’s broad investment holdings and small investment office size. “It gives people responsibility nice and early on. It sets people up either to have a career in the endowment world or elsewhere.”

Plus, he adds: “Being near a university is quite a cool place to live.”